# REAL BRIEFINGS AUTOMATED REPORT **File:** `BEL-CON-BFC-2025-08-25_Summary_Report.txt` --- ## MODULE 1: MEETING METADATA AND OVERVIEW **Type:** Budget and Finance Committee Meeting **Date:** August 25, 2025 **Duration:** 59m 5s **Location:** City Council Chambers, City Hall, 210 Lottie Street, Bellingham, WA **Committee Members Present:** - Lisa Anderson (Chair) - Daniel Hammill - Michael Lilliquist **Key Staff Presenters:** - Andy Asbjornsen (Finance Director) - Forrest Longman (Deputy City Administrator) **Meeting Structure:** 1. 2025 Second Quarter Financial Review (Bill #24640) 2. Sales Tax Resolution Authorization (Bill #24648) **Key Themes:** - Structural budget deficit challenges - Revenue stagnation vs. inflation - Public safety funding needs - New state sales tax opportunity --- ## MODULE 2: AGENDA ITEMS SUMMARY ### Item 1: 2025 Second Quarter Financial Review (Bill #24640) **Presenter:** Andy Asbjornsen, Finance Director **Type:** Information/Discussion **Duration:** ~30 minutes **Summary:** Comprehensive review of city's financial position through Q2 2025, including sales tax collections, housing market indicators, permit activity, and fund-by-fund analysis. Highlighted flat sales tax growth and significant capital outlay increases. ### Item 2: Sales Tax Resolution Authorization (Bill #24648) **Presenter:** Forrest Longman, Deputy City Administrator **Type:** Action Item **Duration:** ~10 minutes **Summary:** Authorization for Mayor to submit eligibility documentation for new state-authorized 1/10th of 1% sales tax for criminal justice purposes. Would generate approximately $4 million annually if implemented. **Council Action:** Motion to approve passed unanimously --- ## MODULE 3: FINANCIAL ANALYSIS AND BUDGET IMPACTS ### Current Financial Position (Through June 2025): - **Citywide Revenues:** $196.2 million - **Citywide Expenditures:** $212.9 million - **Net Deficit:** $(16.7) million ### General Fund Status: - **Revenues:** $61.8 million (51% of budget) - **Expenditures:** $60.9 million (48% of budget) - **Net Position:** $858,157 surplus (aided by revenue redistributions) ### Key Financial Challenges: - **2026 Projected Deficit:** $10 million - **Structural Problem:** $6 million annual increase from salary/benefit costs alone - **Revenue Stagnation:** Sales tax buying power equivalent to 2019 levels ### Revenue Analysis (Inflation-Adjusted): - **Sales Tax:** Equivalent to 2019 purchasing power - **B&O Tax:** Less than 2018 levels - **Property Tax:** Less than 2005 levels due to 1% annual cap ### Capital Outlay Highlights: - **Total:** $41.1 million (vs. $20.2 million in 2024) - **Major Projects:** PSOC Phase 2 ($10M), watershed acquisitions ($9M), sewer projects ($6.3M) --- ## MODULE 4: POLICY DECISIONS AND LEGISLATIVE ACTIONS ### Resolution 24648 - Sales Tax Authorization **Decision:** Approved unanimously **Effect:** Authorizes Mayor to submit eligibility documentation to state Criminal Justice Training Commission **Key Policy Elements:** - Does not commit city to imposing tax - Creates opportunity for future consideration - Addresses urgent timeline requirements (October 17, 2025 deadline) ### Revenue Strategy Changes (2025): 1. **Sales Tax Redistribution:** Shifted from street fund to general fund 2. **Investment Revenue:** Allocated unrestricted interest to general fund 3. **Fire Pension Levy:** Redirected to general fund 4. **Combined Impact:** $3.7 million additional general fund revenue ### Budget Process Timeline: - **September 29:** Mayor's proposed budget presentation - **October-November:** Budget work sessions - **November 17:** Final budget ordinance adoption target --- ## MODULE 5: INFRASTRUCTURE AND CAPITAL PROJECTS ### Major Active Projects (2025): - **PSOC Phase 2:** $10 million in facilities fund - **Watershed Land Acquisitions:** $9+ million - **Meridian Sewer Projects:** $6.3 million - **James/Bakerview Intersections:** $4.1 million - **Waterfront Construction:** $3.7 million ### Housing Market Indicators: - **Active Listings:** 835 (June 2025) vs. 505 (June 2024) - 66% increase - **Permit Activity:** ~400 units through June (targeting 800 annually) - **Construction Revenue:** Down 23% year-over-year - **Development Services:** Down $490,000 in review fees ### Utility Infrastructure: - **Water Fund:** $15.4M revenue, $11M expenses - **Wastewater:** $17.7M revenue, $20.5M expenses - **Stormwater:** $7M revenue, $6.9M expenses --- ## MODULE 6: PUBLIC SAFETY AND EMERGENCY SERVICES ### Public Safety Funding Challenges: - **Police Department:** $19 million budget (largest general fund expense) - **Fire Department:** $18.9 million budget (second largest) - **Medic One:** Slight revenue shortfall noted ### New Sales Tax Opportunity: - **Authorized Amount:** 1/10th of 1% (0.1%) - **Estimated Revenue:** $4 million annually - **Eligible Uses:** Law enforcement, domestic violence services, public defenders, reentry programs, crisis intervention ### Federal Funding Concerns: - **Litigation Status:** City joined lawsuit with Pacifica Law Group - **At-Risk Programs:** HUD grants, transportation funding, street projects - **Preliminary Injunction:** Favorable initial ruling for withholding prevention ### Grant Program Requirements: - Training compliance through Criminal Justice Training Commission - Policy implementations for eligibility - 45-day state review process for authorization --- ## MODULE 7: COUNCIL MEMBER POSITIONS AND QUOTES ### Council Chair Lisa Anderson: *"I'm not opposed to supporting this. I was a little hopeful that it wasn't a supplant of our current budget, but there might be the possibilities of some augmentation of providing some better services... I'm hoping this taxation helps maintain at least those services that this funding is going to be going towards."* ### Council Member Daniel Hammill: *"This is a step in the process. This is really to get us to the point where we can then make a decision to be moved forward with this with an ordinance... We've got to turn this thing around pretty quick."* ### Council Member Michael Lilliquist: *"This is the necessary step forward on a tight timeline voting in favor of it. I really want to make sure that we can use these to fund current existing ongoing programs."* ### Mayor Kim Lund: *"We have some hard work to do in the next few months... We need to be very clear-eyed about where we're at as a city and we're inviting all of you, all of our labor leaders, to be part of how we move forward together right now."* --- ## MODULE 8: COMMUNITY IMPACT AND STAKEHOLDER CONSIDERATIONS ### Housing Market Impacts: - **Affordability Crisis:** High mortgage rates affecting sales velocity - **Market Stagnation:** Active listings at highest levels since 2016 - **Construction Slowdown:** 23% decline in building-related sales tax ### Federal Risk Assessment: - **VASH/Section 8:** Potential impacts to veteran and tenant assistance programs - **Community Concerns:** Council Member questions about vulnerable populations - **Reimbursement Risk:** Federal grants operate on spend-first, reimburse-later basis ### Tourism and Economic Development: - **Lodging Tax:** $1.3 million through August, down $50,000 year-over-year - **Tourism Spending:** Slight decline in visitor activity indicators ### Labor Relations: - **Transparency Commitment:** Financial information shared with labor leaders - **Collaborative Approach:** Mayor emphasized partnership in addressing budget challenges --- ## MODULE 9: OPERATIONAL ISSUES AND ADMINISTRATIVE UPDATES ### Revenue Collection Performance: - **Sales Tax:** Year-over-year increase of only $160,000 (essentially flat) - **B&O Tax:** Up 11% due to improved outreach and compliance - **Utility Tax:** Increases primarily from city's own utilities ### Fund Management Issues: - **Medic One Fund:** Billing process changes affecting revenue categorization - **Enterprise Funds:** Generally performing at expected levels - **Special Revenue:** Mixed performance across restricted-purpose funds ### Technology and Infrastructure: - **IT Services:** Consolidated into fund 540s - **Fleet Management:** $1.85M increase with vehicle replacement needs - **Facilities:** Major capital projects affecting reserves ### Administrative Efficiency: - **Position Management:** Ongoing review of open positions and hiring freezes - **Cost Control:** Efforts to maintain expenses below budget targets - **Service Level Maintenance:** Balancing cuts with service quality --- ## MODULE 10: NEXT STEPS AND FOLLOW-UP ACTIONS ### Immediate Actions (August-September 2025): 1. **CJTC Application:** Submit eligibility documentation to state Criminal Justice Training Commission 2. **Budget Development:** Continue work on 2026 budget proposal 3. **Council Consideration:** September ordinance consideration for sales tax implementation ### Budget Process Timeline: - **September 15:** Next committee meeting - **September 29:** Mayor's budget presentation - **October:** Weekly budget work sessions - **November 17:** Target for final budget adoption ### Strategic Planning: - **Public Safety Strategic Plan:** Completion expected by year-end - **Long-term Sustainability:** Development of structural budget solutions - **Grant Opportunities:** Pursue available federal and state funding ### Monitoring Requirements: - **Federal Litigation:** Track lawsuit progress regarding grant funding - **Revenue Performance:** Continue monthly financial reporting - **Market Indicators:** Monitor housing and development trends ### Council Priorities: - **Service Preservation:** Maintain current public safety service levels - **Community Engagement:** Transparent communication about budget challenges - **Collaborative Solutions:** Work with labor and community stakeholders **Meeting Conclusion:** Committee adjourned for transition to public works and natural resources session at 11:20 AM. --- **Report Generated:** BEL-CON-BFC-2025-08-25 **Document Status:** Complete Summary Report **Next Committee Meeting:** September 15, 2025